Gold Forecast To Rise; Buyers Have Multiple Investment Options

Gold is likely to benefit as the U.S. dollar loses purchasing power.

The 2011 gold outlook from most analysts, simply put, is higher.

But for new investors wanting to join the gold rush, there is still some homework to do. They might want to familiarize themselves with the many ways in which they can invest--from coins to exchange-traded funds to mining stocks--to decide which are most suited for them.

Gold has been in a decade-long bull market, rising from roughly $250 an ounce to a recent record of $1,431. Many look for still more gains. BNP Paribas has forecast an average of $1,500 in 2011, while Goldman Sachs has a 12-month target of $1,690 (but also cautioned that gold could peak in 2012)

Gold is likely to benefit as the U.S. dollar loses purchasing power due to factors such as spending deficits and a rising debt load, said Jeff Clark, editor of Casey Research’s Big Gold newsletter. “Gold is priced in U.S. dollars. So as the dollar loses value, gold must go up almost by default.”

The metal has been viewed as the “ultimate currency,” often rising even on days when the dollar strengthens, said Bill O’Neill, one of the principals with LOGIC Advisers. This frequently occurs when European debt concerns rattle investors.

“There is no great desire from large investors in particular to hold any currency,” said O’Neill, who looks for $1,600 gold next year. Many central banks are adding gold to their reserves, he said. Also, governments and central-bank moves to pump money into the economy have fueled fears of inflation, which supports gold.

Just as investors should diversify overall portfolios, Clark and O’Neill suggested some diversification for the portion in gold, since there are pluses and minuses for each alternative.

http://www.kitco.com/reports/KitcoNews20101215AS_outlook.html

15 December 2010, 11:43 a.m.
By Allen Sykora
Of Kitco News